It is thus a performance measurement metric applied in business, industries, government, non government, profit and not for profit organizations to align organizational performance against strategic goals. It judges a business’ performance on financial as well as some non financial parameters therefore providing a balanced view of the organization’s performance. It enables executives to pragmatically set the firm’s goals keeping the vision and mission in mind and then check the performance gaps at each stage and accordingly take corrective actions, thus implementing their strategies.

Metrics

The balanced scorecard suggests 4 metrics to evaluate a firm’s overall performance. These are as follows:

Financial

Managing the financials of a company has been and will always be the most important objective for the executives. The company must do well on its balance sheet for the shareholders to be satisfied and for continuously getting the required funding. Some of the metrics which can be looked at under this are-

Return on investment

Cash flow

Return on capital employed

Financial results (quarterly/yearly)

Learning and growth

This refers to both “individual” and “corporate” aspects of learning and growth. The discoverer Dr Kaplan emphasizes more on learning than on growth and hence suggests presence of mentors in the organization who can help junior business executives to learn which will automatically lead to growth. Kaplan says that learning and growth should be a continuous process especially in today’s world where technology is changing so fast and employee skills and knowledge are the only resource that a company has in the longer run. The factors which can be considered under this head can be-

Correct knowledge skills abilities for the job

Job satisfaction

Training centers/opportunities in the organization

Employee churn rates

Customer

“Customer focus” and “Customer satisfaction” are the very crucial for the success of any business organization. It is the customers for who the business exists and hence it is essential to cater to their needs in a proper manner or otherwise ethe business might lose them to the competitors. The metrics under which this head can be studied are-

Satisfaction rate of the customer

Delivery performance

Quality of product or service provided

Retention rate of customer

Market share

Internal business processes

This allows business managers to discern whether the business is going in the right direction and moving smooth or not. Here, main check is to see whether mission statements are being complied or not and that the business principles are being implemented. The factors which can be looked at are-

Process bottlenecks

Process automation

Alignment of processes in the right direction

Duplicate activities across functions

Number of activities across functions

Hence, this concludes the definition of Balanced Scorecard Kaplan Norton along with its overview.

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